Speculative short-covering and the addition of new longs lifted cotton futures to a four-session string of higher closes and the biggest one-day closing gain – 150 points – last week since mid-November.

Spot March reached the lip of what traders perceived as a formidable resistance area before giving up most of the advance to finish with just a 75-point gain for the week ended Thursday to 92.05 cents. December expired Wednesday at a 71-point discount to March, closing at 91.60 cents.

Many traders moved to the sidelines or jockeyed for position ahead of potential market-moving developments in updated USDA supply-demand estimates and conclusion of a European Union summit on the euro zone economic crisis. Both were scheduled for Friday.

Scale-up trade selling contributed to curbing rallies and some mill fixations may have helped to provide support on weakness. Thin, holiday-like trading volumes suggested a lack of conviction.

A buildup of speculative shorts among small traders as futures fell to a new low for the year the previous week had left the market vulnerable to a short-covering bounce, and March subsequently closed four straight sessions above its nine-day moving average.

Small traders sold a net 4,205 lots to boost their net shorts in futures-options combined to a record 10,096 in the week ended Nov. 29. Trend-following funds bought a net 2,628 lots to raise their net longs to 7,269 and index funds sold 1,189 lots to shave theirs to 51,459.

Cash sales declined to 20,275 bales on The SeamΆs grower-to-business exchange during the week ended Thursday from 33,783 bales the previous week. Prices edged up 38 points to an average of 91.09 cents, with loan repayment rates on the turnover up 27 points to 54.96 cents.

On the demand scene, a reduction in net U.S. export commitments for delivery this season during the week ended Dec. 1 was viewed as underscoring the threat of cancellations of higher-priced sales made earlier and replacement with lower-priced foreign growths.

Upland cancellations of 109,600 running bales exceeded gross sales of 75,500 bales for a net reduction of 34,100 bales. Net Pima sales hit a marketing year high of 11,200 bales.

All-cotton commitments dipped to 10.081 million running bales. This widened the gap behind year-ago commitments to 3.265 million bales or 24.5 percent. The USDAΆs November estimate was down 21 percent.

Shipments of 244,800 running bales — including a crop year high of 19,600 of Pima — lifted exports for the season to 2.031 million bales. This widened the margin behind exports a year ago to 980,700 bales or around 33 percent.

Net sales of 1,100 running bales for delivery next season nudged 2012-13 commitments to 397,300 bales, down 1.021 million running bales from forward bookings a year ago.

On the global scene, a sharp drop in world cotton prices this season from record highs in 2010-11 has reduced farmersΆ income and decreased for the first time in three years the attractiveness of the crop against its main alternatives, says the International Cotton Advisory Committee.

As a result, the ICAC secretariat projects global cotton area to contract in 2012-13 by 8 percent to 33.3 million hectares (82.29 million acres) and production to decline by 6 percent to 25.14 million metric tons (115.47 million 480-pound bales).

Output is expected to decline in most major producing countries, ICAC says, except in the United States, Uzbekistan and Australia.

Global cotton mill use is forecast to start growing again after two seasons at depressed levels. This expectation is highly dependent on the assumption of a recovery in global economic growth that would stimulate purchases of textile products and consumption of raw fibers, ICAC says.

The secretariat projects global mill consumption to rise by 3 percent in 2012-13 to 25.02 million tons (114.92 million bales), driven by Asia.

Rising mill use and lower cotton prices could fuel a rebound in world trade. Imports and exports are expected to jump by 9 percent to 8.4 million tons (38.58 million bales).

With global production and consumption expected to roughly balance next season, the secretariat forecasts global ending stocks to increase only slightly to 11.6 million tons (53.37 million bales).

On the U.S. crop scene, weekly upland cotton classing rose to 1,043,061 running bales from 965,211 bales the previous (Thanksgiving) week. This boosted the seasonΆs total to 11,151,828 bales, 13 percent below year-ago upland classing of 12,828,489 bales.

Cotton tenderable on futures contracts totaled 69.8 percent for the week and 67.8 percent for the season.

Pima classing totaled 58,627 bales for the week and 293,000 bales for the season, up 26 percent from 231,931 bales graded through the corresponding period last year.

The all-cotton total thus reached 11,444,848 running bales for the season, down about 12 percent from 13,060,420 bales classed a year ago. The USDAΆs November crop estimate was about 10 below the year-ago output.

Quality of 1,245,139 bales classed for the season at Lubbock has been generally better than expected, though staples have been a little shorter than usual.

Staples have averaged of 35.03, with 63.7 percent stapling 35 and longer. Color grades 21 and better have totaled 88.7 percent, leaf grades have averaged 2.05 and mikes have averaged 4.28, with 88.3 percent in the most desirable range of 35-49. Strength has averaged 29.88. Bark has totaled 11.7 percent.

Back on the international scene, BrazilΆs 2011-12 output is forecast at a record 9.5 million bales, up 8 percent from the 2010-11 production estimated at 8.7 million bales, says a U.S. agricultural attaché report.

Favorable potential returns and significant sales committed mainly for export contributed to an estimated planted area increase of 6 percent to 1.5 million hectares (3.707 million acres). The post estimated BrazilΆs 2011-12 exports at 4.1 million bales, based on sizable demand from China, more than double the 2 million bales exported in 2010-11.